Activist investor Carl Icahn has become the largest shareholder in Caesars Entertainment after upping his stake to 15.5 per cent, bringing his total investment in the company close to $1bn.

The company has become a popular target among hedge funds looking for undervalued companies and possible sale targets. The gaming sector, in particular, has attracted interest from activist investors who think the industry is ripe for consolidation.

Caesars recently agreed to replace three of its board members with Mr Icahn’s nominees after the activist disclosed a 10 per cent stake in the company in February, raising the prospect of a sale.

“Caesars would be a great opportunity for certain investors who have already expressed interest, and I’m glad the Board will explore these opportunities,” Mr Icahn, the 82-year old billionaire investor said last week.

The casino chain rejected an unsolicited cash-and-stock merger proposal from Golden Nugget Casinos last year, which would have valued the company at $13 a share.

Caesars’ share price has climbed since the beginning of the year from below $6 to more than $8.

Mr Icahn owns over 100m shares in the company, 5.5 per cent of which are held as convertible bonds. The second-largest shareholder is the Los Angeles -based hedge fund Canyon Capital Advisors with more than a 10 per cent stake.

Chief executive Mark Frissora — who announced last November he would step down in February — will stay on until the end of April, though the company can extend his term for another month.

Mr Icahn can appoint a fourth representative to the board if Caesars fails to hire a new chief executive within 45 days of the agreement.

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